Many organisations offer accommodation to employees, either as a benefit or to meet a job-related requirement.  If the accommodation is simply the use of a room when working a late or early shift, this is unlikely to create too many issues, but where the employee lives at the address, it can be a much more tricky area.

Be clear on what terms the accommodation is offered:

Service occupancy: the right to occupy a dwelling is dependent on the employment and terminates when the employment does, under the contract of employment.

Tenancy Agreement (regulated by the Housing Act): the employer lets the dwelling in return for rent, and does not automatically have vacant possession when the employment ends.

Contractual acommodation

If the job requires the employee to live-in or it is offered as a benefit, an appropriate clause should be included in the contract of employment confirming that the accommodation will cease on termination of employment.  It should also specify whether the accommodation is offered free of charge or at a cost; define responsibility for utility bills, buildings and contents insurance etc; who is permitted to live there; whether reimbursement will be required for any damage etc.

Other considerations may include:

*   is the accommodation single occupancy only? Is there a safeguarding issue?

*    what if the employee's circumstances change (eg gets married/has a child)?

*   is smoking permitted?

*   are pets allowed? 

*   are there any strict rules that need to be emphasised? (eg zero-tolerance to drugs on the premises, no overnight guests etc).

*   how will you deal with short absences such as sickness/annual leave?

*   how will you deal with extended leave (eg maternity/adoption/paternity leave)? Note: the employee will have the right to remain in the accommodation if this is a contractual benefit.

National Minimum Wage (NMW)

Special rules relate to accommodation and there is a limit (currently £4.91 per day or £34.37 per week – increasing in October 2014) on the amount that an employer providing accommodation can count towards the NMW pay.

Tax considerations

Any benefit provided to an employee (including accommodation, utilities, phone etc) will need to be reported to HMRC and tax and NI contributions may apply. HMRC provides more information on what should be reported. 

Accommodation in colleges and universities

The National Minimum Wage (Amendment) (No.2) Regulations 2011 amended the rules relating to accommodation in colleges and universities. Many provide student accommodation and also employ students. Higher Education and Further Education Institutions are now exempted from the NMW accommodation offset rules where they provide accommodation to a worker who is enrolled on a full-time course with that institution.

Sleep-ins and 'on-call' time

There has been confusion as to what hours count towards the NMW. Much of this stems from the definition of 'working time' (used for the purposes of the Working Time Regulations) being different to that of 'work' under the NMW Regulations. Under the NMW, there are four categories of type of work: time work, salaries-hour workers, output work and unmeasured work. Different rules apply as to the hours for which the NMW must be paid, according to which category the worker falls into. The problems relating to sleep-ins and call-outs have largely been due to confusion over "on-call" and sleeping time within the first two categories.

If the worker is a time worker, then even if sleeping, he/she must be paid the NMW for all hours on site; if however, the worker is a salaried worker, he/she is not entitled to the NMW for those hours spent asleep.

Under the WTR, there are set rules as to how many hours employees can work, and how often breaks must be taken. These still apply to those who live on site! A common difficulty with those living on site is the requirement to provide an uninterrupted break of at least 11 hours. Other rules and exceptions apply, and the rules are tighter for young workers, so please take further advice if you are concerned.

Future changes

A private member's bill (Employment Practices Bill 2014-15) will require employers who offer residential accommodation as part of a package, to offer a financial payment as an alternative (which will be based on a prescribed scale). This will reflect the cost of bed and breakfast in the area where the employee works, so unlike the NMW rates, there are likely to be regional variations.

The bill aims to tackle exploitation of migrant workers and the financial alternative will not apply where the accommodation is provided as a necessary requirement of the employment. 

If you are likely to be affected, consider the accommodation you offer – are your employees likely to prefer the money? What would be the implications if you are required to offer payment to employees who wish to live in other accommodation?

Further guidance

Our website offers detailed advice on the above. HMRC also provides a list of expenses and benefits to help you decide whether you need to declare payments: see:  HTTP://